Agricultural Transformation and

Rural Development

By :

Tiara Dwi Yulianita

(01031281722061)

Accounting Department
Economics Faculty
Sriwijaya University
2018
 Agricultural Transformation and Rural Development

Agricultural Growth: Past Progress and Current Challenges

Research by the International Food Policy Research Institute points up that a wide range of successful
programs have reduced hunger while raising agricultural productivity over the last several decades,
including Green Revolution successes in Asia; containment of wheat rusts ; hybrid rice and mung
bean improvement in East Asia.
Green Revolution is the boost in grain production associated with the scientific discovery of new
hybrid seed varieties of wheat, rice, and corn that have resulted in high farm yields in many
developing countries.

Low-income countries tend to have the highest share of the labor force in agriculture, sometimes as
much as 80 to 90%

Three Systems of Agriculture

First, in what the report terms agriculture-based countries, agriculture is still a major source of economic
growth—although mainly because agriculture makes up such a large share of GDP. Some 82% of the
rural population of sub-Saharan Africa lives in these countries. It also includes a few countries
outside the region, such as Laos. And a few African countries, such as Senegal, are undergoing
transformation.

Second, most of the world’s rural people—some 2.2 billion—live in what the report categorizes as
transforming countries, in which the share of the poor who are rural is very high (almost 80% on
average) but agriculture now contributes only a small share to GDP growth (7% on average). Most of
the population of South and East Asia, North Africa, and the Middle East lives in these countries,
along with some outliers such as Guatemala.

Third, in what the report calls urbanized countries, rural-urban migration has reached the point at
which nearly half, or more, of the poor are found in the cities, and agriculture tends to contribute
even less to output growth. The urbanized countries are largely found in Latin America and the
Caribbean, along with developing eastern Europe and Central Asia, and contain about 255 mil- lion
rural dwellers.

Market Failures and the Need for Government Policy

Agriculture is generally thought of as a perfectly competitive activity, but this does not mean that
there are no market failures and no role for government. In fact, market failures in the sector are quite
common and include environmental externalities. such as missing markets and capital market
failures. Despite many failures, sometimes government has been relatively effective in these roles, as
in Asia during its Green Revolution.

But government also has a role in agriculture simply because of its necessary role in poverty
alleviation—and a large majority of the world’s poor are still farmers. Poverty itself prevents farmers
from taking advantage of opportunities that could help pull them out of poverty. A key role for
government, then, is to ensure that growth in agriculture is shared by the poor. In some countries,
impressive agricultural growth has occurred without the poor receiving proportional benefits.
Transforming Economies: Problems of Fragmentation and Subdivision of Peasant Land in
Asia

The basic problem in Asia is one of too many people crowded onto too little land.

The traditional Asian agrarian structure before European colonization was organized around the
village. Local chiefs and peasant families each provided goods and services—produce and labor from
the peasants to the chief in return for protection, rights to use community land, and the provision of
public services.

The arrival of the Europeans (mainly the British, French, and Dutch) led to major changes in the
traditional agrarian structure, In the area of property rights, European land tenure systems of private
property ownership were both encouraged and rein- forced by law.

The Important Role of Women

Nearly all tasks associated with subsistence food production are performed by women. Although
men who remain home generally perform the initial task of cutting trees and bushes on a potentially
cultivable plot of land, women are typically responsible for all subsequent operations, including
removing and burning felled trees, sowing or planting the plot, weeding, harvesting, and preparing
the crop for storage or immediate consumption.

Women make an important contribution to the agricultural economy through the labor they supply in
the cultivation of cash crops. Cash crops is a crop produced for its commercial value rather than for
use by the grower.

Though the production and profits from commercial crops are generally controlled by men . Perhaps
the most important role of women is providing food security for the household

The Transition from Traditional Subsistence to Specialized Commercial Farming

We can identify three broad stages in the evolution of agricultural production. The first stage is the
low-productivity, mostly subsistence-level traditional (peasant) farm. The second stage is what might
be called diversified or mixed family agriculture, where a small part, of the produce is grown for
consumption and a significant part for sale to the commercial sector. The third stage represents the
modern farm, exclusively engaged in high-productivity, specialized agriculture geared to the
commercial market, as in developed countries.

Subsistence Farming: Risk Aversion, Uncertainty, and Survival

Farmers are often resistant to technological innovation in farming techniques or to the introduction of
new seeds or different cash crops.

When access to information is highly imperfect, the transaction costs of obtaining this information are
usually very high. Given price uncertainty, traditional (peasant) farmers often face a wide range of
possible prices rather than a single input price.

By the fact that human lives are at stake. In regions where farms are extremely small and cultivation
is dependent on the uncertainties of variable rainfall, average output will be low, and in poor years,
the peasant family will be exposed to the very real danger of starvation
Accordingly, when risk and uncertainty are high, small farmers may be very reluctant to shift from a
traditional technology and crop pattern that over the years they have come to know and understand
to a new one that promises higher yields but may entail greater risks of crop failure.

FIGURE 9.6 Small-Farmer Attitudes toward Risk: Why It Is Sometimes Rational to Resist
Innovation and Change

Figure 9.6 provides a simple illustration of how attitudes toward risk among small farmers may
militate against apparently economically justified innovations. In the figure, levels of output and
consumption are measured on the vertical axis and different points in time, on the horizontal axis,
and two straight lines are drawn. The lower horizontal line measures the minimum consumption
requirements (MCR) necessary for the farm family’s physical survival. This may be taken as the
starvation minimum fixed by nature. Any output below this level would be catastrophic for the
peasant or subsistence farming family. The upper, positively sloped straight line represents the mini-
mum level of food consumption that would be desirable, given the prevailing cultural or potential
productivity factors affecting village consumption standards. It is assumed that this line rises over
time.

Looking at Figure 9.6, we see that at time X, farmer A’s output levels have been very close to the
MCR. She is barely getting by and cannot take a chance of any crop failure. She will have a greater
incentive to minimize risk than farmer B, whose output performance has been well above the
minimum subsistence level and is close to the minimum desired consumption level (MDCL). Farmer
B will therefore be more likely than farmer A to innovate and change. The result may be that farmer
A remains in a self-perpetuating poverty trap. Moreover, inequality is growing.